What's the True Cost of the Bailout

[Art G]

I like this blog better....

700Billion bailout ? Ebay it ! « blog maverick

[Art G]

Originally Posted by REWahoo

Too bad he can't figure out how to win an NBA championship...

I think he knows how, he should have paid Tim Donaghy more than the bookies did for him to screw the Mavs.

[yakers]

Originally Posted by al_bundy

why have this crazy system when the market can do this for you? good for him and other rich people that have access to more information. bad for the guy on the street managing his investments

Hey, we know what our stuff is worth, we should make sure our ass assets are covered:

BuyMyShitPile.com: Hey Washington, can you buy my bad investments too?

[audreyh1]

Originally Posted by Art G

Audrey, I think you have a pretty good grasp on the situation, but you need to take a more dire view of the results. By naked shorting FNM and FRE, without any concern about covering, it caused the stock to freefall. Considering there was no uptick rule, they didn't have to concern themselves with a ratchet down in price, or even a slowing drop in price. It made them able to tank the stocks!
Now, if you're a shareholder in Fannie Mae, how long are you willing to watch that price go from $60 to $3 before you bail and take your losses?

Yes - thank you for outlining the additional (and accurate) direness to the picture! It was the combination of no uptick rule and naked shorting (which was illegal but not enforced!!!!) and rating agency ratings that proved so deadly this past month.

With the uptick rule in place, and proper enforcement of naked shorting, it might never have been necessary for the US Govt take over FNM and FRE, and maybe some of the other financial institutions.

I'm sure the US Govt would still have had to step in to some degree due to the massive leveraging of these crazy investment banks, and the mortgage mess, but perhaps not on the current scale.

Audrey

[FinanceDude]

Originally Posted by audreyh1

I don't think Congress lifted the uptick rule. I think the SEC did that all by themselves.

Audrey

yeah, but WAY TOO late for it to help....... Bottom line, hedge funds have exploded in assets, and their leverage advantages using short selling tools that funds and others can't use, finally tipped the house of cards over.

[Art G]

The SEC knew there was a problem. At first they merely stated, no more naked shorting on FNM or FRE. They came back a month or two later to include major banks. Why not, in one swoop, just state no more naked shorting?? Because people in Washington were making a killing in hedge funds.
How long before someone starts suing these hedge funds?

[audreyh1]

Originally Posted by FinanceDude

yeah, but WAY TOO late for it to help....... Bottom line, hedge funds have exploded in assets, and their leverage advantages using short selling tools that funds and others can't use, finally tipped the house of cards over.

Huh? Way too late? 2007? They shouldn't have removed the uptick rule at all!

Audrey

[FinanceDude]

Originally Posted by audreyh1

Huh? Way too late? 2007? They shouldn't have removed the uptick rule at all!Audrey

Why?? It's not like it created a liquidity crisis or anything. Bottom line, if the hedge funds had to follow rules like the mutual funds do, noone would invest in them, because the their advantage would be neutralized.......

[TromboneAl]

Hey, I just figured out how the government could make a profit on the bailout. The key is to get people to pay their subprime mortgages, right? So, d'uh, we just send this guy out to make the collections!

[d]

the ultimate "cost" of this will all depend on whether 1) "we" make a habit of doing it, and 2) how much political advantage is taken of the situation. if done well and "clean", the "cost" could indeed be 0 or negative. but given the way things usually go with politicians ... .

[cute fuzzy bunny]

Wait until the other shoe drops...when people get their mortgages renegotiated down to current levels, and then 7 years from now when they sell, they pick up a nice profit...tax free!

[ladelfina]

I'm still waiting for that Iraq war to start paying for itself.. as dozens of Very Serious and Important People said it would.

I think the chances are right in around there..

[cute fuzzy bunny]

Oh look, its now a soapbox post!

I wonder what the foreclosure rate in Iraq is?

[ladelfina]

Ha ha.. apologies.. some of these bailout finance things are in both places.

I'm just saying, we've been promised profits before, and I'd like to see more evidence as to how they think we'd arrive there before jumping on board.

I don't see that as particularly partisan thinking, but I will try to remember to check the heading so as not to risk offending..

[2B]

Originally Posted by ladelfina

I don't see that as particularly partisan thinking, but I will try to remember to check the heading so as not to risk offending..

Feel free to offend me anytime.

[riskadverse]

The true cost of the bailout is the suspension of free markets and higher inflation. Greenspan had been holding interest rates artificiallylow for wall street through long term capital, Y2K, 911, etc etc etc. Bernake followed his lead and now that the Fed is out of bullets (or on their last bullet), they're knocking on your door to try and interrupt the business cycle yet again.

[Art G]

In my opinion, Bernanke pulled the trigger waaaaaay too soon. He emptied his gun of bullets long before the battle had begun.

[Canadian Grunt]

If you go to this link you can see the history of bailouts in the US.


Bailout Aftermaths - ProPublica


History of U.S. Gov’t Bailouts - ProPublica

[OAG]

CG-Nice site and information. In some cases (notably Chrysler and NYC) the Treasury did not lose.

[Art G]

Apparently the cost is zero. Being that they can't agree on a plan that puts money in all of their pockets.....and yes, I am very cynical today.